John Bellamy Foster - The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China

The Endless Crisis

How Monopoly-Finance Capital Produces
Stagnation and Upheaval from the U.S.A. to China

by JOHN BELLAMY FOSTER
and ROBERT W. McCHESNEY

Copyright 2012 by John Bellamy Foster and Robert W. McChesney
All rights reserved

Library of Congress Cataloging-in-Publication Data

Foster, John Bellamy

The endless crisis : how monopoly-finance capital produces stagnation and
upheaval from the U.S.A. to China / by John Bellamy Foster and Robert W.
McChesney.

p. cm.

Includes bibliographical references and index.

ISBN 978-1-58367-313-3 (cloth : alk. paper)

1. Capitalism. 2. Stagnation (Economics). 3. Economic development. I.

McChesney, Robert Waterman

HB501.F659 2012

332.041dc23

2012021925

Monthly Review Press

146 West 29th Street, Suite 6W

New York, New York 10001

www.monthlyreview.org

CHARTS

TABLES

THE WORLD ECONOMY AS a whole is undergoing a period of slowdown. The growth rates for the United States, Europe, and Japan at the center of the system have been sliding for decades. In the first decade of this century these countries experienced the slowest growth rates since the 1930s; and the opening years of the second decade look no better. Stagnation is the word that economists use for this phenomenon. In human terms it means declining real wages, massive unemployment, a public sector facing extreme budget crises, growing inequality and a general and sometimes sharp decline in the quality of life. It produces all sorts of social and political crises, and these crises and their consequences will likely be the defining events of the coming generation. For the vast majority of the populationexcluding the big winners at the topit feels like an endless crisis. The trouble with normal, singer and songwriter Bruce Cockburn tells us, is it always gets worse.

The Great Financial Crisis of 200709 was itself linked to this slowdown in the real economy, referred to by some as the Great Stagnation. China and a handful of emerging economies have continued to expand in recent years, but they too are not immune to the general crisis, and are showing signs of a downward shift and increasing instability. In an increasingly globalized economy the fates of the various nations within it are more and more intertwined.

But while there is a growing acceptance among business leaders and policymakers, not to mention everyday people, of economic stagnation as the state of contemporary capitalism, there is little explanation for the state of affairs. Conventional economics, which cheered on deregulation of financial markets and then slept through the financial meltdown, provides some insights but it has not proven well-suited to the task. Like first-time parachutists grasping their ripcords, most economists cling tightly to the conviction that capitalisms natural state is full employment and rapid growth, so eventually the market will work its magic.

In contrast, we argue that this is an endless crisis, because it flows inexorably from the functioning of what we term monopoly-finance capital. There is no reason to expect growth to improve markedly and for a sustained length of time based on the internal logic of the system, and the existing range of legitimate business-approved options before policymakers. Hence, the normal state of a mature capitalist economy dominated by a handful of giant monopolistic corporations is one of stagnation. This has been true for nearly a century (if not longer) and the Great Depression of the 1930s provides, no pun intended, a depressing example. For decades thereafter a variety of mechanismsgenerally through government actionallowed the system to stave off stagnation and provide growth, but these mechanisms tended to have deleterious side effects; their usefulness dissipated or was eventually undermined. The most important, and most recent, was the massive increase in debt from 19802008 which propped up the economy but was unsustainable and eventually led to the Great Financial Crisis. The factors that induce stagnation are greater today, and globalized, so the future for the economy is grim.

Our objective is not to produce a polemic, or a manifesto; the aim is rather more ambitious and more modest. It is to provide a coherent evidence-based explanation for stagnation, and why it is an endless crisis. Although we believe the evidence points strongly in one political directionif people want to get off the downward spiral of stagnation and growing human misery, it will require radical change in the economic systemthere is no litmus test for who may read this book. We intend that it be of value to anyone, whatever their background or political values, who wishes to understand what may be the central political-economic issue of our lifetimes. We want to do what we can to encourage a broad public debate on the matter, and then participate in that debate. For a crisis of this magnitude, we need all hands on deck.

The book was written between 2009 and 2012, although the research has been done throughout our careers and is the product of discussions that we have had for more than thirty years. The chapters originally appeared in Monthly Review, the magazine John Bellamy Foster edits and to which Robert W. McChesney frequently contributes (and was for a time co-editor).

We have many people to thank, whose assistance has been foundational to the books existence. First and foremost, we must acknowledge the important contribution of R. Jamil Jonna. As we were researching and writing the three articles that now comprise chapters three, four, and five of the book, we quickly realized we needed assistance with gathering data, and using the data to prepare charts and tables for the articles. Jamil, who is the webmaster for Monthly Review and a doctoral candidate at the University of Oregon specializing in political-economic research, did such an extraordinary job that he joined us as coauthor of the three articles. His role is acknowledged in each of these chapters below. However, responsibility for the overall conception and analysis in these three chapters, as in the book as a whole, remains ours.

A number of other people have been crucial in the development of this book. Fred Magdoff has helped with every chapter, and particularly with the charts in the Introduction and chapter six. John Mage originally suggested developing this short book based on ongoing work we were doing (part of a bigger project) and we are indebted to him for inspiration and advice. We have benefited throughout from his keen sense of financialized accumulation. William E. Foster helped with the research in chapters five and six, finding key materials. Hannah Holleman, as an MR research assistant, helped with the research, fact-checking and proofing in relation to nearly every chapter. Ryan Wishart also helped in proofing some of these chapters and providing us with materials.

Spencer Sunshine and Susie Day, as MRs assistant editors while this book was in production, did the initial copyediting and frequently had specific points that improved the writing. Much of the clarity of this book, despite the difficult topic area, has to do with their immense editorial skills.

Martin Paddio, Michael D. Yates, John J. Simon, Brett Clark, Scott Borchert, and Yoshie Furuhashi at MR helped in too many ways to be mentioned. Martha Sweezy has provided unfailing encouragement.